It seems counter-intuitive. Insurance companies should want to limit lawsuits. However, they often settle most first-party lawsuits rather than litigate aggressively. Thus, there's an increase in claims.
From the plaintiff attorney's side, there is an incentive. Because Florida has a statute providing attorneys' fees for first-party property lawsuits, plaintiff attorneys file lawsuits because insurance companies often settle rather than go to trial. When insurance companies settle virtually every lawsuit, particularly those without merit, it spurs more lawsuits.
Certainly, when a lawsuit comes in that should have been paid on the front end, looks clearly underpaid, or involves claims decisions that could be misconstrued during discovery, settle it before the defense lawyer incurs fees. But first institute a system to evaluate each case from the beginning--don't assume cases should always be settled. Blindly allowing insurance defense lawyers to litigate freely, and then maybe settle on the figurative courthouse steps, is not a sound business model.
I've heard plaintiff's attorneys say "[this carrier] settles every case for $7,500 plus fees" or "I sue [this insurer] all the time--they like me and settle after initial discovery." But what if an insurer earned a reputation for taking cases to trial, instead of automatically paying? The playing field would change enormously.
Claims and liability managers must combat frivolous lawsuits.
Plaintiff attorneys have finite resources to devote to their cases. If an institutional defendant has a reputation of defending claims, attorneys may be reluctant to bring suit unless there's truly been an egregious oversight.
Plaintiff attorneys--like all attorneys --are eager to make money. So what is profitable? Continually filing lawsuits, regardless of the facts and merit, knowing that insurance companies will pay to settle them.
It's time for that to change.
Full disclosure: I am a defense attorney, so aggressive defense litigation is good for business. But why do so many insurance companies tell me they hate lawsuits and their litigation budget is too high, yet they continually settle every claim that comes to them?
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|Publication:||Florida Bar News|
|Article Type:||Letter to the editor|
|Date:||Jan 1, 2014|
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